The Clorox Company is a leading manufacturer and marketer of consumer and institutional products with approximately 8,100 employees worldwide and fiscal year 2011 net sales of $5.2 billion. The following is an excerpt from the comparative income statements (beginning with earnings from continuing operations) from Clorox’s 2011 annual report ($ in thousands):

An income statement sometimes includes items that require separate presentation (net of income taxes) within the statement. The two possible “separately reported items” are discontinued operations and extraordinary items.
Clorox reports one of these items.
A disclosure note from Clorox’s 2011 annual report is shown below:

Required:
1. The disclosure note shows adjustments for “the dilutive effect of stock options and other.” What other adjustments might be needed? Explain why and how these adjustments are made to the weighted-average shares outstanding.
2. The disclosure note indicates that the effect of some of the stock options were not included because they would be antidilutive. What does that mean? Why not include antidilutive securities?
3. Based on the information provided, prepare the presentation of basic and diluted earnings per share for 2011, 2010, and 2009 that Clorox reports in its 2011 annualreport.

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Earnings from continuing operations $287 $526 $472 65 65 Discontinued operations: Earnings from Auto businesses, net of tax Gain on sale of Auto businesses, net of tax 23 247 270 $557 Earnings from discontinued operations Net earnings $603 $537 NOTE 15. EARNINGS PER SHARE The following is the reconciliation of net earnings to net earnings applicable to common stock: 2011 $287 270 557 2 $555 2009 $472 65 537 2010 Earnings from continuing operati Earnings from discontinued operations Net earnings Less: Earnings allocated to participating securities Net earnings applicable to common stock ons $526 603 $600 $532 The following is the reconciliation of the weighted average number of shares outstanding (in thousands) used to calculate basic EPS to those used to calculate diluted EPS: 2011 2010 2009 Basic Dilutive effect of stock options and ot 136,699 140,272 139,015 1,154 140,169 her 1,402 1,262 Diluted 138,101 141,534 During fiscal years 2011, 2010 and 2009, the Company did not include stock options to purchase approximately 2.0 million, 4.0 million and 5.1 million shares, respectively, of the Company's common stock in the calculations of diluted EPS because their exercise price was greater than the average market price making them anti-dilutive.